-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, WrCmM2DH6WzEoaZg/giO/d0ebIb70HjoeLv/NXVjb3hG/n/chN976MVd+yr+t/WQ 0bAD/crZjcDLwv66WMl5qg== 0000950172-95-000032.txt : 19950607 0000950172-95-000032.hdr.sgml : 19950607 ACCESSION NUMBER: 0000950172-95-000032 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950126 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HILLHAVEN CORP CENTRAL INDEX KEY: 0000276477 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-NURSING & PERSONAL CARE FACILITIES [8050] IRS NUMBER: 911459952 STATE OF INCORPORATION: NV FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-05965 FILM NUMBER: 95502985 BUSINESS ADDRESS: STREET 1: 1148 BROADWAY PLZ CITY: TACOMA STATE: WA ZIP: 98402 BUSINESS PHONE: 2065724901 FORMER COMPANY: FORMER CONFORMED NAME: MERIT CORP DATE OF NAME CHANGE: 19600201 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL MEDICAL ENTERPRISES INC /NV/ CENTRAL INDEX KEY: 0000070318 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-GENERAL MEDICAL & SURGICAL HOSPITALS, NEC [8062] IRS NUMBER: 952557091 STATE OF INCORPORATION: NV FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: P O BOX 4070 CITY: SANTA MONICA STATE: CA ZIP: 90404 BUSINESS PHONE: 3103158000 MAIL ADDRESS: STREET 1: P O BOX 4070 CITY: SANTA MONICA STATE: CA ZIP: 90404 SC 13D/A 1 SCHEDULE 13D AMENDMENT NO. 3 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Amendment No. 3) Under the Securities Exchange Act of 1934 THE HILLHAVEN CORPORATION (Name of Issuer) Common Stock, par value $.75 per share (Title of Class of Securities) 431576 10 7 (CUSIP Number of Class of Securities) Scott M. Brown, Esq. National Medical Enterprises, Inc. 2700 Colorado Avenue Santa Monica, California 90404 (310) 998-8000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) with a copy to: Brian J. McCarthy, Esq. Skadden, Arps, Slate, Meagher & Flom 300 S. Grand Avenue Los Angeles, California 90071 (213) 687-5070 January 25, 1995 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Statement because of Rule 13d-1(b)(3) or (4), check the following: ( ) Check the following box if a fee is being paid with this Statement: ( ) (1) NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS NATIONAL MEDICAL ENTERPRISES, INC. 95-2557091 (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a)( ) (b)(X) (3) SEC USE ONLY (4) SOURCE OF FUNDS* 00 (5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) (X) (6) CITIZENSHIP OR PLACE OF ORGANIZATION Nevada : (7) SOLE VOTING POWER : : 8,878,147 : NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING OWNED BY EACH REPORTING : 0 PERSON WITH : : (9) SOLE DISPOSITIVE : 8,878,147 : :(10) SHARED DISPOSITIVE : 0 (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 8,878,147 (12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* ( ) (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 27% -- See Item 5 (14) TYPE OF REPORTING PERSON* CO ______________________________________________________________________ (1) NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS NME PROPERTIES CORP. 62-0725891 (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a)( ) (b)(X) (3) SEC USE ONLY (4) SOURCE OF FUNDS* 00 (5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) (6) CITIZENSHIP OR PLACE OF ORGANIZATION Tennessee : (7) SOLE VOTING POWER : : 8,878,147 : NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING OWNED BY EACH REPORTING : 0 PERSON WITH : : (9) SOLE DISPOSITIVE : 8,878,147 : :(10) SHARED DISPOSITIVE : 0 (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 8,878,147 (12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* ( ) (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 27% -- See Item 5 (14) TYPE OF REPORTING PERSON* CO ______________________________________________________________________ (1) NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS NME PROPERTY HOLDING CO., INC. 91-1172506 (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a)( ) (b)(X) (3) SEC USE ONLY (4) SOURCE OF FUNDS* 00 (5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) (6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware : (7) SOLE VOTING POWER : : 2,877,947 : NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING OWNED BY EACH REPORTING : 0 PERSON WITH : : (9) SOLE DISPOSITIVE : 2,877,947 : :(10) SHARED DISPOSITIVE : 0 (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,877,947 (12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* ( ) (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 8.8% -- See Item 5 (14) TYPE OF REPORTING PERSON* CO ______________________________________________________________________ (1) NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS NME PROPERTIES, INC. 91-0628039 (2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a)( ) (b)(X) (3) SEC USE ONLY (4) SOURCE OF FUNDS* 00 (5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ( ) (6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware : (7) SOLE VOTING POWER : : 2,877,947 : NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING OWNED BY EACH REPORTING : 0 PERSON WITH : : (9) SOLE DISPOSITIVE : 2,877,947 : :(10) SHARED DISPOSITIVE : 0 (11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,877,947 (12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* ( ) (13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 8.8% -- See Item 5 (14) TYPE OF REPORTING PERSON* CO ______________________________________________________________________ This Amendment No. 3 (the "Amendment No. 3") amends and supplements the Statement on Schedule 13D (the "Schedule 13D"), dated January 31, 1990, Amendment No. 1 of Schedule 13D, dated February 28, 1994, and Amendment No. 2 of Schedule 13D, dated December 19, 1994, relating to the common stock, par value $.75 per share (the "Common Stock"), issued by The Hillhaven Corporation, a Nevada corporation (the "Company"), and is being filed pursuant to Rule 13d-2 under the Securities Exchange Act of 1934, as amended (the "Act"). Unless otherwise indicated, each capitalized term used but not otherwise defined herein shall have the meaning assigned to such term in the Schedule 13D. The information set forth in the Exhibits attached hereto is hereby expressly incorporated herein by reference and the response to each item of this statement is qualified in its entirety by the provisions of such Exhibits. ITEM 4. PURPOSE OF TRANSACTION Item 4 is amended and supplemented as follows: In the course of reviewing its alternatives with respect to its investment in the Company, NME has had discussions with the Company and third parties concerning possible courses of action. During these discussions, Horizon Healthcare Corporation ("Horizon") indicated that it had orally made a business combination proposal to the Company. Representatives of the Company had indicated to Horizon, and so informed NME, that only a written proposal would be considered by the Board of Directors of the Company. On January 25, 1995, after entering into the letter agreement with NME described below, Horizon submitted a written business combination proposal to the Company, a copy of which is attached hereto as Exhibit 28 (the "Transaction"). In the Transaction, shareholders of the Company would receive $28 in value of shares of common stock of a newly formed holding company ("Newco") for each outstanding share of Common Stock and shareholders of Horizon would receive one share of Newco common stock for each outstanding share of Horizon common stock. In addition, as part of the Transaction, each outstanding share of the Company's Series C and Series D preferred stock would be redeemed at $1,000 per share in cash, plus any accrued and unpaid dividends, whether or not declared, to the date of redemption. In consideration of the mutual covenants contained therein and in order to provide the opportunity contained in the Transaction to the Company and all of its shareholders, NME has entered into a letter agreement with Horizon, a copy of which is attached hereto as Exhibit 29 (the "Letter Agreement"). If prior to consummating a Transaction but within 12 months of the date of the Letter Agreement there is a merger, consolidation or other transaction with any party other than Horizon (an "Other Transaction") in which NME receives consideration for any of its shares of Common Stock equal to or greater than $27.50 per share, then Horizion shall be entitled to receive (and NME shall cause Horizon to receive) upon consummation of an Other Transaction an amount equal to the greater of (i) $5,000,000 or (ii) 50% of the consideration received by NME in excess of $29 per share of Common Stock. Horizon agreed in the Letter Agreement to actively pursue the Transaction in good faith. The Letter Agreement also provides that nothing therein shall be construed to impose any requirement or restriction on NME with respect to its right to acquire or dispose of any shares of Common Stock from or to any party, or to vote any shares of Common Stock, and all decisions with respect thereto shall be made by NME in its sole discretion. NME believes that a business combination transaction will provide all of the Company's shareholders with the best alternative to achieve maximum values. NME believes that the Transaction provides an attractive opportunity for the Company and its shareholders and believes that the Transaction requires the serious review and consideration of the Company's Board of Directors. NME understands that the Board of Directors of the Company has established a committee to review, among other things, business combination proposals involving the Company. Except as otherwise described in this Item 4, none of NME, PropCorp, Holding or PropInc has any present specific plans or proposals that relate to or would result in any of the following: (i) the acquisition by any person of additional securities of the Company or the disposition of securities of the Company, (ii) an extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries, (iii) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries, (iv) any change in the present Board of Directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the Board of Directors, (v) any material change in the present capitalization or dividend policy of the Company, (vi) any other material change in the Company's business or corporate structure, (vii) changes in the Company's Amended and Restated Articles of Incorporation, Bylaws or other instruments corresponding thereto or other actions that may impede the acquisition of control of the Company by any person, (viii) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association, (ix) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended, or (x) any action similar to those enumerated above. NME, PropCorp, Holding or PropInc may at any time, however, propose any of the foregoing that it considers desirable. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER PropInc may be deemed to be the beneficial owner of the 2,877,947 shares of Common Stock owned by it (the "PropInc Shares"), or approximately 8.8% of the shares of Common Stock outstanding. PropInc has the sole power to vote and the sole power to dispose of the PropInc Shares. PropCorp and Holding, as the sole stockholders of PropInc, may be deemed, for the purposes of Rule 13d-3 under the Act, to beneficially own indirectly the PropInc Shares. PropCorp may be deemed to be the beneficial owner of the 6,000,200 shares of Common Stock owned by it (the "PropCorp Shares"), or approximately 18.3% of the shares of Common Stock outstanding. PropCorp has the sole power to vote and the sole power to dispose of the PropCorp Shares. As noted above, PropCorp also may be deemed, for purposes of Rule 13d-3 under the Act, to beneficially own indirectly the PropInc Shares, for an aggregate of 8,878,147 shares of Common Stock, or approximately 27% of the shares of Common Stock outstanding. NME, as the sole stockholder of PropCorp and Holding, may be deemed, for purposes of Rule 13d-3 under the Act, to beneficially own indirectly the PropCorp Shares and the PropInc Shares, for an aggregate of 8,878,147 shares of Common Stock, or approximately 27% of the shares of Common Stock outstanding. The Reporting Persons, in the aggregate, may be deemed to beneficially own 8,878,147 shares of Common Stock, or approximately 27% of the shares of Common Stock outstanding. The percentage of shares of Common Stock outstanding reported as beneficially owned herein on the date hereof is based upon 32,824,463 shares of Common Stock outstanding, based upon the 28,624,463 shares of Common Stock outstanding as of January 1, 1995 and the 4,200,000 newly issued shares of Common Stock that the Company announced on January 16, 1995 that it had committed to issue to a newly established grantor trust. NME reserves all rights in connection with the establishment of the grantor trust and the issuance of the shares of Common Stock thereto. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Item 6 is amended and supplemented as follows: The information set forth in Item 4 above is incorporated herein by reference. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 27 Joint Filing Agreement Exhibit 28 Letter from Horizon to the Company, dated January 25, 1995 Exhibit 29 Letter agreement between NME and Horizon, dated January 25, 1995 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: January 25, 1995 NATIONAL MEDICAL ENTERPRISES, INC. By: /s/ Scott M. Brown ________________________________ Scott M. Brown Senior Vice President and Secretary SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: January 25, 1995 NME PROPERTIES CORP. By: /s/ Scott M. Brown ________________________________ Scott M. Brown Vice President SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: January 25, 1995 NME PROPERTY HOLDING CO., INC. By: /s/ Scott M. Brown ________________________________ Scott M. Brown Vice President SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: January 25, 1995 NME PROPERTIES, INC. By: /s/ Scott M. Brown ________________________________ Scott M. Brown Vice President EXHIBIT INDEX Exhibit No. Description Page No. Exhibit 27 Joint Filing Agreement Exhibit 28 Letter from Horizon to the Company, dated January 25, 1995 Exhibit 29 Letter agreement between NME and Horizon, dated January 25, 1995 ______________________________________________________________________ Exhibit 27 JOINT FILING AGREEMENT In accordance with Rule 13d-1(f) under the Securities Exchange Act of 1934, as amended, each of the persons named below agrees to the joint filing on behalf of each of them of a Statement on Schedule 13D (including amendments thereto) with respect to the common stock, par value $.75 per share, of The Hillhaven Corporation, a Nevada corporation, and further agrees that this Joint Filing Agreement be included as an exhibit to such filings provided that, as contemplated by Section 13d-1(f)(l)(ii), no person shall be responsible for the completeness or accuracy of the information concerning the other persons making the filing, unless such person knows or has reason to believe that such information is inaccurate. This Joint Filing Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. Date: January 25, 1995 NATIONAL MEDICAL NME PROPERTIES CORP. ENTERPRISES, INC. By:/s/ Scott M. Brown By:/s/ Scott M. Brown _________________________ ______________________ Scott M. Brown Scott M. Brown Vice President Senior Vice President and Secretary NME PROPERTY HOLDING NME PROPERTIES, INC. CO., INC. By: /s/ Scott M. Brown By:/s/ Scott M. Brown ________________________ ____________________ Scott M. Brown Scott M. Brown Vice President Vice President ______________________________________________________________________ EXHIBIT 28 HORIZON HEALTHCARE CORPORATION 6001 Indian School Road, N.E. Albuquerque, New Mexico 87190 (505) 881-4961 January 25, 1995 The Hillhaven Corporation 1148 Broadway Plaza Tacoma, Washington 98402 Attention: Mr. Bruce Busby Chairman and CEO Dear Bruce: On behalf of Horizon Healthcare Corporation ("Horizon"), I am pleased to confirm in writing the following proposal for a business combination between Horizon and The Hillhaven Corporation ("Hillhaven"). As you know, we have followed the development of Hillhaven's business for some time. Based on our review of publicly available information about Hillhaven and our analysis of the strategic fit between our companies, we firmly believe that a combination is in the long-term best interests of our companies and our respective stockholders. During our meeting on January 17, 1995, I presented you with a summary analysis of the benefits of a combination from our point of view (the "January 17 Presentation"), prepared in conjunction with our financial advisor, Donaldson, Lufkin & Jenrette Securities Corporation. Our proposed merger also has the support of National Medical Enterprises, Inc. ("NME"). Consistent with the January 17 Presentation and our subsequent conversations, we are proposing a merger (the "Merger") pursuant to which the stockholders of Hillhaven would receive, for each share of common stock of Hillhaven held by them, $28 in value of common stock of a newly formed holding company ("Newco"), subject to normal collar provisions, and our stockholders would receive 1.0 shares of Newco stock for each Horizon share held by them. This $28 per share value represents a 35% premium to the NYSE closing price of the Hillhaven shares on December 20, 1994, the day before the public announcement that Hillhaven and NME were in discussions with respect to the Hillhaven shares held by NME. As part of the Merger, each outstanding share of Hillhaven Series C and Series D Preferred Stock would be redeemed at $1,000 per share in cash, plus any accrued and unpaid dividends, whether or not declared, to the date of redemption. The Merger would be treated as a pooling of interests for accounting purposes and would be a non-taxable transaction for federal income tax purposes. Under our proposal, Newco would cause one of its newly-formed subsidiaries to merge into Hillhaven. Simultaneously, Newco would cause another of its newly-formed subsidiaries to merge into Horizon. As a result of these mergers, Newco would become a new publicly-held company with two wholly- owned subsidiaries. OPERATIONS AND STRATEGIC FIT We are prepared to meet with you to discuss the many strategic, operational and other benefits that the combined entity can realize through its proposed transaction. The January 17 Presentation contains a summary analysis of the financial implications of the proposed combination, background on our company, the combined company business plan and the rationale for the merger. For your convenience, we are supplying, under separate cover, copies of our Annual Report to Stockholders; our Annual Report on Form 10-K for the year ended May 31, 1994; our Quarterly Report on Form 10-Q for the quarter ended November 30, 1994 and the prospectus dated November 17, 1994 relating to our common stock offering completed on November 25, 1994. We estimate the merger will be non-dilutive based on publicly available information, implementation of our business plan and pooling treatment with no goodwill implications. NME would own approximately 13% of the combined company stock on a fully-diluted basis, and would not be bound by any on-going standstill requirements other than compliance with pooling requirements. OTHER TERMS AND CONDITIONS We are prepared to provide you with a form of Merger Agreement containing representations, warranties, covenants and conditions customary for a transaction of this nature and magnitude. These conditions will include, among other things, (i) the amendment of Hillhaven's Rights Agreement (or, at our request, the redemption of the Rights issued thereunder) to exempt Horizon and the Merger from the operation of the Rights Agreement and (ii) action by Hillhaven's Board of Directors to ensure that Sections 78.411 through 78.444 and 78.378 through 78.3793 of the Nevada Private Corporations Law will not apply to the proposed transaction. In addition, we would expect NME to enter into a voting agreement supporting the proposed transaction. CONCLUSION I hope that you will be as enthusiastic as we are about the exciting prospect of combining our two companies. Of course, we are ready to discuss our proposal with you and your advisors at any time or to make a presentation to your Board of Directors. Please feel free to call me at (505) 881-4961 extension 3018. This matter has the highest priority for all of us at Horizon, and we look forward to hearing from you soon. Sincerely, HORIZON HEALTHCARE CORPORATION /s/ Neal Elliott _______________________________ Neal Elliott Chairman of the Board ______________________________________________________________________ EXHIBIT 29 HORIZON HEALTHCARE CORPORATION 6001 Indian School Road, N.E. Albuquerque, New Mexico 87190 (505) 881-4961 January 25, 1995 National Medical Enterprises, Inc. 2700 Colorado Avenue Santa Monica, California 90404 Attention: Mr. Jeff Barbakow Chairman of the Board of Directors Re: The Hillhaven Corporation Gentlemen: As you are aware, Horizon Healthcare Corporation ("Horizon") has made a business combination proposal to The Hillhaven Corporation ("Hillhaven"), as outlined in the letter previously delivered to National Medical Enterprises, Inc. ("NME") (the "Transaction"). In the Transaction, shareholders of Hillhaven would receive $28 in value of shares of common stock of a newly formed holding company ("Newco") for each outstanding share of Hillhaven common stock (the "Shares") and shareholders of Horizon would receive one share of Newco common stock for each outstanding share of Horizon common stock. In addition, as part of the Transaction, each outstanding share of Hillhaven's Series C and Series D Preferred Stock would be redeemed at $1,000 per share in cash, plus any accrued and unpaid dividends, whether or not declared, to the date of redemption. In consideration of the mutual covenants contained herein, NME and Horizon have agreed as follows: 1. If prior to consummating a Transaction but within 12 months of the date hereof there is a merger, consolidation or other transaction with any party other than Horizon (an "Other Transaction") in which NME receives consideration for any of its Shares equal to or greater than $27.50 per Share, then Horizon shall be entitled to receive (and NME shall cause Horizon to receive) upon consummation of an Other Transaction an amount equal to the greater of (i) $5,000,000 or (ii) 50% of the consideration received by NME in excess of $29 per Share. If the consideration received for NME's Shares in an Other Transaction includes securities or other assets or property other than cash, such consideration shall be valued at fair market value at the time of receipt, and NME, at its option, may distribute to Horizon the payments required to be made under the foregoing sentence in cash or in kind. It is intended that each of NME and Horizon will be responsible for the income tax liability attributable to the portion of the consideration received by each party, respectively, in an Other Transaction. 2. Horizon agrees to actively pursue the Transaction in good faith. 3. This letter agreement shall terminate upon the termination or abandonment of Horizon's efforts to consummate the Transaction. Notwithstanding the foregoing sentence, the provisions of Section 1 hereof shall survive such termination, provided that Horizon shall have complied with the terms of Section 2 hereof. 4. Nothing in this letter agreement shall be construed to impose any requirement or restriction on NME with respect to its right to acquire or dispose of any Shares from or to any party, or to vote any Shares, and all decisions with respect thereto shall be made by NME in its sole discretion. 5. This letter agreement shall be governed by and construed in accordance with the laws of the State of New York. If NME agrees to the terms set forth in this letter, please execute and return the enclosed copy of this letter agreement, at which time this letter agreement shall constitute a binding agreement between the parties hereto. Very truly yours, HORIZON HEALTHCARE CORPORATION /s/ Neal Elliott ______________________________ Neal Elliott Chairman of the Board AGREED AND ACCEPTED: NATIONAL MEDICAL ENTERPRISES, INC. By: /s/ Scott M. Brown ______________________________ -----END PRIVACY-ENHANCED MESSAGE-----